Ground Lease Disputes
Splitting land ownership from the building on top of it works fine for decades — until a scheduled rent reset, a missed payment, or a bankruptcy forces a court to decide what the ground lease actually means. Several of Manhattan and Chicago's highest-profile towers are fighting exactly that fight right now.
What's driving disputes right now
Grounded in current market and legal reporting, not speculation — each item links to its source.
Fair-Market-Value Rent Reset Fights
At Carnegie House (100 West 57th Street), a ground lease pegging rent to 8.1667% of the land's fair market value hit its scheduled reset and an arbitration panel awarded the landowners — entities tied to Rubin Schron's Cammeby's International and David Werner — a roughly 450% increase, from about $4 million to $24 million. A New York appellate court unanimously overturned that arbitration award in September 2026 after finding the landlord's attorneys had sabotaged the original proceeding, sending the co-op back to the negotiating table for a fair reset.
Why it matters: Rent-reset clauses written decades ago collide with modern appraisal disputes and can threaten to multiply a ground tenant's costs many times over almost overnight — and courts are willing to unwind an arbitration award when the process itself was compromised.
Appraisal Deadlock at One Penn Plaza
The Korein family, which owns the land under Vornado's One Penn Plaza tower, sued in February 2026 asking a judge to accept their own appraisal valuing the land at $1.9 billion — nearly six times a prior appraisal of roughly $337 million — after the ground lease's scheduled June 2023 rent reset stalled and the Koreins said they could not find a broker willing to represent them against Vornado. A Manhattan judge dismissed the suit in June 2026, leaving the underlying valuation dispute to the lease's own appraisal-panel mechanism.
Why it matters: When a reset formula depends on "fair market value" and the two sides' appraisals differ by a billion dollars or more, litigation over the valuation process itself — not just the number — becomes its own battleground.
Ground-Rent Default & Lease Termination
Aby Rosen's RFR stopped paying ground rent on the Chrysler Building to landowner Cooper Union in May 2024, accumulating roughly $21 million in arrears on a lease that called for over $32 million a year. New York Supreme Court Justice Jennifer Schecter granted Cooper Union summary judgment terminating the lease and awarding it control of the building — rejecting as "the flimsiest of flimsy" RFR's argument that a defective termination notice should void the default — and Cooper Union took over management in late 2024.
Why it matters: A ground lease default doesn't just trigger damages — it can cost the leasehold owner the building itself, since the landowner's remedy for nonpayment is typically outright termination and repossession, not a lien.
Landowner-vs.-Leasehold-Owner Eviction Fight
Investor Mike Kohan took control of the 33 West Monroe Street office tower in Chicago's Loop in early 2026 by buying a discounted, troubled loan against the building. The Baptist Theological Union, which owns the ground under part of the property, filed suit in August 2026 seeking to evict Kohan's venture from its half of the building over the ground lease, threatening to unwind his control of the tower just months after he acquired it.
Why it matters: Distressed-debt buyers who pick up a leasehold interest at a discount can still find their new position is only as good as the ground lease underneath it — a landowner with independent leverage can undo a bargain purchase entirely.
Bifurcated Ownership, Simultaneous Defaults
A 2015 deal split ownership of Chicago's 300 South Riverside Plaza: building owners David Werner and Joseph Mizrachi sold the underlying land for $220 million to a venture of Rubin Schron's Cammeby's International and David Lowenfeld's World Wide Group, then leased it back on a long-term ground lease. In February 2026, both halves of that split stack went bad within weeks of each other — Werner and Mizrachi allegedly fell behind on their $175 million building mortgage while, separately, the landowners' own $167 million loan (collateralized by the ground lease's rent stream) was pushed into special servicing, and lender LNR Partners filed a foreclosure complaint against the landowners.
Why it matters: Splitting land from building creates two independently-financed interests, not one — and post-pandemic office distress is now showing that both halves of that stack can unravel at once rather than one insulating the other.
Landmark: What Counts As a "True Lease" in Bankruptcy
In MOAC Mall Holdings LLC v. Transform Holdco LLC (2d Cir. Dec. 16, 2024), arising from Sears' bankruptcy and its space at Minnesota's Mall of America, the Second Circuit held that the Bankruptcy Code's strict deadline for a debtor to assume or reject a nonresidential real property lease under 11 U.S.C. § 365(d)(4) simply does not apply to an agreement — like many ground-lease-style arrangements — that isn't a "true lease" under state law.
Why it matters: The label "ground lease" or "lease" on a document doesn't control in bankruptcy court — how a court characterizes the underlying economic arrangement can decide whether a landowner ever gets the fast, automatic-rejection protections the Code gives most commercial landlords.
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